Cemex closes on Murli Industries cement business in a US$550m deal

Cemex, the world’s largest building materials supplier and third largest cement producer, is in an advanced stage to buy the cement business of India’s Murli Industries for about US$550m.

Citing an unnamed source involved in the negotiations, The Economic Times today reported that Cemex has made an offer of US$550m after several months of due diligence, but the price is still being negotiated and the final figure would depend on the outlook for cement prices.

Earlier known as Murli Agro Products Ltd, Nagpur-based Murli entered the cement sector in February 2010 through its cement plant in Chandrapur in Maharashtra with an installed capacity of 3Mta.

It is also planning to build two additional cement plants in Junagadh in Rajasthan and Gulbarga in Karnataka and Rajasthan, both with an identical capacity of 3Mta, along with two captive power plants of 50MW each at a total investment of INR1135 crore each.

The cement plants are expected to be operational by the middle of 2013.

The company in August 2010 had appointed Motilal Oswal Investment Advisors to find a buyer for its cement business, but not finding any potential buyers, was mulling to raise INR1000 crore through various routes to finance its two upcoming cement plants and to repay its INR600 crore debt.

In April 2010, the company was looking to buy a majority stake in Hyderabad-based Penna Cement, which has a total capacity of 5Mt, and is in the process of setting up another plant.

Cemex, which has a cement production capability of 82Mta, had reported 2009 revenues of US$15bn and lost US$86m in the third quarter of 2010, a sharp decrease from the US$78m net profit it made in the same period last year.

Cemex’s larger rivals have already cemented their presence in India with Lafarge having a total production of around 6.5Mt through its four cement plants, two in the state of Chhattisgarh, one each in Jharkhand and West Bengal.

Holcim has a total production of around 50Mt and plans to raise its capacity in the country to 60Mt over the next five years. It operates in India through its ACC and Ambuja Cements units.